OPPORTUNITIES FOR GROWTH

A Global Dialogue on Business in Austria,

Europe and the Emerging CESEE Region

March 2014

Austria

March 2014

Table of Contents
About 21st Austria  2
Austrias growth story 3
Successfully niching global markets 4
Austrias hidden champions  5
Expertise in the CESEE+ region 8
Solid fundamentals  10

About 21st Austria

In late 2011, Austrian companies together with the Central Bank of Austria and the
Vienna Stock Exchange took the initiative to start a dialogue about the opportunities as
well as the challenges for Austria in a rapidly changing world. It is a unique effort to
explain the current basis of the countrys global competitive position and to share
learnings and ideas for the future.
The members of 21st Austria are (in alphabetical order):
AT&S, Austria Metall AG, Austrian Privatization Agency (IAG), BAWAG P.S.K., Central
Bank of Austria, EVN AG, Immofinanz Group AG, OMV AG, Pioneers, Post AG, Raiffeisen
Bank International AG, Raiffeisen Landesbank Obersterreich, Verbund AG, Vienna
Stock Exchange, voestalpine AG, whatchado.
The initiative 21st Austria closely cooperates with the Austrian Trade Commissions in
London and in New York as well as with the Austrian Ministries of Economy and Finance.
Dr. Claus J. Raidl, President of the Central Bank of Austria, acts as Spokesperson of 21st
Austria.
The members of 21st Austria
 Comprise more than 50% of the market capitalization at the Vienna Stock Exchange;
 Have a leading market position in numerous CESEE countries or their respective
sectors worldwide;
 Include examples of strong investors in Turkey where Austria is one of the largest
investors;
 Include showcase start-ups that are examples of the vibrant start-up scene of Austria
and Europe.
The members of 21st Austria undertake this joint effort
 To strengthen the awareness of Austria and Europe as a business location in the U.S.
and in the United Kingdom focusing on the huge number of hidden champions in
Austria that offer highly innovative and specialized products and are often world
leaders in their respective fields;
 To establish an ongoing dialogue with political, business and academic opinion
leaders;
 To establish a structured, efficient, unbureaucratic and swift communication network
to inform the financial community;
 To encourage increased activity of international investors in the Austrian capital markets.


Austria

March 2014

AUSTRIAS GROWTH STORY

Superiority, uniqueness cannot be outsourced
but only be created by oneself.
Thats the deeper truth about specialization.
Hermann Simon, author of Hidden Champions
Austrias unemployment rate is just 4.5 percent and consistently the EUs lowest rate. It
is a country whose tourism industry seems recession-proof and whose capital city Vienna
is repeatedly ranked No. 1 on Mercers Quality of Living index. An enviable record and
one that seems counterintuitive in the context of a slumping global economy, regionwide pressures, and a common currency, which in recent years, has been written off by
various commentators.
Austria owes its organic growth and solid development to a large extent to the flexibility
of Austrian companies when it comes to adapting to new circumstances and challenges.
Austrian enterprises show an admirably high degree of innovativeness and adaptability
that ensure their outstanding performance and leading market positions. These hidden
champions over 90 percent of them are SMEs form the backbone of Austrias economy.
1. Austria successfully niching global markets
The German author and strategy consultant Hermann Simon has coined the phrase
hidden champions based on his long-term research in this field. He attributes the
success of hidden champions to some distinctive factors such as a strong focus on
production, outstanding in-house innovation and research, a highly skilled labor force
force thanks in Austrias case to the dual system of apprenticeship and vocational
education, a strong export oriented approach, and a high vertical integration of
manufacture. Germany, Austria and Switzerland show the highest concentration
globally of small and medium-sized enterprises that have a global market leader
position in their respective industries. These companies represent a strong force in
Austria and have a massive share in the overall success of Austrias economy.
2. Austria, the transformation agent and driving force in the CESEE+1 region
Along with the transformation of the CESEE region Austrias role has changed from door
opener to the much more sophisticated role as a transformation agent. Austrian
companies together with their 20,000 joint ventures support the development of a
business infrastructure and financial markets according to European standards in
CESEE+ countries. Austrias engagement in these countries is, therefore, based on longterm considerations. The growth potential of the CESEE+ region remains intact:
cumulative growth until 2016 is expected to reach 20.0%, greatly exceeding growth
forecast for the U.S. at 15.0%. With a population of almost 420 million aspiring to higher
living standards and improved infrastructure and services, this above average growth is
most likely to continue.
3. Solid fundamentals make Austrias economy robust and resilient
Within Europe, Austria has a lower debt, a lower deficit and stronger growth than the
majority of EU member states. Thanks to a diversified structure of external trade in
regional terms as well as sectors, exposure to foreign exchange and market risks is
relatively low. Austria has the lowest unemployment rate in the EU (2012: 4.3%) and its
labor market proved to be very robust during the crisis 2008/09. Furthermore, Austria
ranks among the best countries worldwide with regard to social stability.

1 CESEE+ comprises Estonia, Latvia, Lithuania, Poland, Czech Republic, Bulgaria, Hungary, Slovenia, Slovakia,
Romania, Albania, Croatia, Serbia, Bosnia and Herzegovina, Macedonia, Kosovo, Montenegro, Russia, Ukraine,
Moldova, Belarus, Kazakhstan and Turkey.

Austria

March 2014

Austria successfully
niching global markets
In his long-term research, German author and strategy consultant Hermann Simon has
identified more than 2,700 hidden champions worldwide and studied their common
traits. Hidden champions are characterized by the following traits:
 They are hardly known but are

European or global market leaders in

their respective industries and owe
their leading position to an
outstanding performance and quality
of their products.
 Hidden champions are clearly
focused on growth and market
leadership.
 They define a leading market position
not only in terms of market share,
but claim to lead customers and
competitors by setting international
standards and benchmarks.
 They focus on clearly defined markets
and provide a high vertical
integration of manufacture, which
makes their products and services
unique.
 As they focus on niche markets they
are willing to globalize in order to
reach the necessary economies of
scale.
 Hidden champions foster tight
relations with their customers. Their
customer focus is five times higher
than that of big companies.
 They invest huge amounts in
research and development. Customer
needs trigger half of the innovations.
 The superiority of hidden champions
is based on the outstanding quality of
their products. In recent years they
added further benefits such as
consulting services that are hard to
imitate.

Hidden Champions by Country

Germany

1307

USA

366

Japan

220

Austria

116

Switzerland

110

Italy

76

France

75

China

68

Great Britain

67

Sweden

49

Netherlands

29

Poland

27

South Korea

23

Belgium

19

Denmark

19

Canada

16

Russia

14

Finland

14

Norway

13

Spain

11

Brasil

11

Australia

10

Turkey

Luxembourg

Slovenia

Israel

total worldwide: 2734

Source: Hidden Champions by Hermann Simon

2012 Campus Verlag

 Hidden champions are highly

profitable; and they usually have a

high equity ratio.
 They pay special attention to the
education and well-being of their
employees and enjoy a very low
fluctuation. Also CEOs tend to have a
long period of office, often up to 20
years.

The German speaking area (Germany, Austria, and Switzerland) is home to more than
55% of all hidden champions worldwide. Although this area has a population of less
than 100 million (1.5% of the world population), there are more small and mediumsized world market leaders located there than in the rest of the world.

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March 2014

Austrias hidden champions

A new industrial revolution seems to be in the making triggered by new informationbased production technologies. In his book Makers , Chris Anderson describes the
impact of these new technologies to the characteristics of handmade products:
Variability is the mark of all things handmade. Now, to a greater extent than was
conceivable at the time of manual technologies the very same process of differentiation
can be scripted, programmed, and to some extent designed. Financial Times
correspondent Peter Marsh assumes in his book The New Industrial Revolution that
small countries might be smarter in promoting entrepreneurship and internationalization
than big, centrally controlled systems.
The authors arguments provide some explanation for the relatively large number of
hidden champions in Austria. Furthermore, Hermann Simon attributes the success of
hidden champions to some distinctive factors:
 outstanding in-house innovation and
 a strong export oriented approach;
 and a high vertical integration of
research;
 a highly skilled labor force thanks to
manufacture
the dual system of apprenticeship
and vocational education;
Austrias hidden champions feature all of these traits. They have managed to excel in
industries that often look extremely competitive on the surface such as the steel
industry or automotive supply sector but due to their high-degree of specialization,
they have achieved global market leader positions in their respective niches.

Examples
Voestalpine AG
voestalpine is a true global player with a
number of specialized and flexible
companies that produce, process and
further develop high-quality steel
products. voestalpine is world market
leader in turnout technology, tool steel
and special sections as well as number
one in Europe in the production of
special rails.
 Industry sector: steel/metals
 Employees: 46,500
 Founded: 1938
 Website: www.voestalpine.com

BWT Best Water Technology

BWT is Europes leading water
technology company. BWTs trendsetting, economic and ecological
products are practically ubiquitous in
the treatment of drinking water, water
for the pharmaceutical industry as well
as in swimming pools, heating and
process water, and for water for airconditioning.
 Industry sector: water technology
 Employees: 2,700
 Founded: 1990
 Website: www.bwt-group.com

Austria

Lenzing AG
Lenzing supplies the global textile and
nonwovens industry with high-quality
man-made cellulose fibers and is the
leading supplier in many business-tobusiness markets. The portfolio ranges
from dissolving pulp, standard and
specialty cellulose fibers to high-quality
plastic
polymer
products
and
engineering services.
 Industry sector: textile and clothing
 Employees: 6,593
 Founded: 1892
 Website: www.lenzing.com

Do&Co
Do&Co is one of the worlds leading
companies in the food service branch
which is active in nearly every catering
segment, such as airline catering, train
catering and international events
catering. The company is also involved
in providing services through its
restaurants, bars, lounges, and hotels.
 Industry sector: catering
 Employees: 3,800
 Founded: 1981
 Website: www.doco.at

Frequentis
Frequentis AG is a leading global supplier
of communication and information
solutions for safety-critical applications
in two business segments: air traffic
management (civil and military) and
public safety & transport (police, fire
and ambulance services; inland and
maritime shipping; rail).
 Industry sector: communication
systems
 Employees: 980
 Founded: 1947
 Website: www.frequentis.com

March 2014

Doppelmayr
The Doppelmayr/Garaventa Group is
the world quality and technology leader
in ropeway engineering. The company
manufactures chairlifts, cable cars,
gondolas, surface tows for ski and
amusement parks as well as urban
people movers and material handling
systems.
 Industry sector: transport technology
 Employees: 2,660
 Founded: 1892
 Website: www.doppelmayr.com

Trodat
The Trodat Inc. is the worlds market
leader in self-inking stamps and
dominating engraving, marking, and
cutting in the laser area with Trotec. The
global company offers everything
associated with the subject of stamps
(stamps, daters, pads, ink, etc.).
 Industry sector: printing
 Employees: 1,150
 Founded: 1912
 Website: www.trodat.de

Isovoltaic
The Isovolta Group is the global market
and
technology
leader
in
the
development and production of solar
backsheets, a key component required
in photovoltaic modules. Its product
range includes two product families,
differing in the applied raw material and
production processes, whose products
can be further customized to the specific
requirements of the clients.
 Industry sector: renewable energy
components
 Employees: 1.900
 Founded: 1949
 Website: www.isovoltaic.com

Austria

Rosenbauer
The Rosenbauer Group is one of the
worlds largest manufacturers of fireservice vehicles, based in Leonding. The
company supplies the fire fighting sector
in over 100 countries with a wide range
of fire and rescue apparatus and
services. It produces its extensive series
of fire fighting vehicles and aerials in
three continents.
 Industry sector: trucks & other
vehicles
 Employees: 2,400 in Europe, North
America, Asia and Africa
 Founded: 1866
 Website: www.rosenbauer.com

Palfinger
The company Palfinger AG is an
international manufacturer of cranes,
hydraulic lifting, loading and handling
systems. As a multinational company
group with its headquarters in Salzburg,
Palfinger has manufacturing and
assembly sites in Europe, in North and
South America as well as in Asia.
 Industry sector: engineering
 Employees: 6,200
 Founded: 1932
 Website: www.palfinger.com

March 2014

AT&S
The Austria Technologie & Systemtechnik
AG (AT&S) is a leading manufacturer of
circuit boards. Core competences are
printed circuit boards in the HDI
microvia technology. AT&S is a major
supplier to the mobile industry,
automotive
electronics,
industrial
electronics and medical technology.
 Industry sector: circuit boards
 Employees: 7,500
 Founded: 1987
 Website: www.ats.net

Kapsch
The Kapsch Group, headquartered in
Vienna, is an international road
relematics, information technology and
telecommunications
company.
Individual solutions and the high quality
of the systems are traditional strengths
that have made the Kapsch Group one
of the market leaders in the European
traffic telematics and communications
industries.
 Industry sector: information
technology
 Employees: 5,000
 Founded: 1892
 Website: www.kapsch.net

Schoeller-Bleckmann
Oilfield Equipment AG
Schoeller-Bleckmann Oilfield Equipment
AG (SBO) is the global market leader for
high-precision components for the oil
service industry. The companys focus is
on non-magnetic drillstring components
for directional drilling.
 Industry sector: oil service industry
(drilling)
 Employees: 1,459
 Founded: 1862
 Website: www.sbo.at

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March 2014

Austrian expertise in the CESEE+ region

Austria has always been a pioneer in the CEE region. About 1,000 businesses have
located their CEE headquarters in Austria underscoring Austrias role as a conduit to
neighboring countries in Central and Eastern Europe. With the transformation of
countries of the CESEE+ region, Austrias role has to a more sophisticated function of
transformation agent. Austrian companies as well as public institutions act as a driving
force in the CESEE+ region by fostering the development of infrastructure, institutions
and a business and governance environment that meets the requirements of European
standards.
CESEE+remains one of the most dynamic regions worldwide
The CESEE+ region continues to outpace growth in most parts of the world: forecasts
predict a cumulative growth of 20% until 2016 compared with 15% in the U.S and 8%
in the euro area. Despite some markets that face difficulties like Hungary, and although
the region was hit by the crisis in 2008/09, the individual countries of the region have
done a great deal to improve their fiscal standing. With an overall population of 420
million people (compared to 330 million in the euro area and 310 million in the U.S.)
who continue to aspire to higher living standards and improved infrastructure and
services, above average growth is most likely to continue.

80.2

85.0

CESEE countries have done their homework with regard to public finances
Government debt comparatively low in Central, Eastern and South Eastern Europe.

80

31.7

40.1

37.3

41.8

44.9

42.2

MAASTRICHT CRITERIA

38.7

40

39.9

39.7

40.6

50

38.5

60

55.0

58.2

70

10

10.7

6.6

20

11.7

17.4

30

e
ai
n

ey

kr
U

rk

a
en
i

Tu

ic
ov

Sl

ia

pu
bl

Re

ak
ov

ia

rb
Se
Sl

Ru
ss

ia
th
ua
ni
a
Po
la
nd
Ro
m
an
ia
Li

h
ec
Cz

La
tv

lic
Es
to
ni
a
H
un
ga
ry
Ka
za
kh
st
an

ub

Re
p

oa
ti
Cr

ga

ri

a
Bu
l

in

a
an
d

er

ze
g

ba

ni

-1

Al

EA

Bo
sn
ia

ov

Source: Central Bank of Austria

Austrias strong ties to the region

It is not sufficient to reduce Austrias ties to the region to historical connections. Mutual
linkages exist in various areas from business to education to infrastructure. 40
institutions in Vienna alone are dedicated to the CEE region, such as the Vienna Institute
for International Economic Studies (WIIW), the Competence Center for Central Eastern
Europe or the Financial Services Club CEE. The Vienna Airport provides flight connections
to 47 destinations in the CEE region, more than any other airport in Europe (including
Frankfurt). Austrias focus on the CESEE+ region is also mirrored by the flow of FDI. More

Austria

March 2014

than 50% of Austrias FDI go to the CESEE region; more than 20% are directed to Turkey.
From 2002 to 2010, Austria ranked no. 1 in Turkey with total investments over 4.5 billion
US Dollar (3.4 billion Euros).
Austrias long-term view towards the region
Austrian companies do not regard the CESEE+ region as a place to make a quick
investment and then move on. On the contrary, Austrians firmly believe in a joint
development that is mutually beneficent and thus long-term oriented. Solid structures,
reliable institutions, rule of law, and efficient bureaucracy are all ingredients that should
guarantee a sustainable win-win situation for the countries of the region and Austria.
The ongoing efforts of the Austrian government to support the CESEE+ countries to
establish efficient e-government structures serves as just one example for the positive
transformation process.
Austrias banks are in a strong position in the CESEE+ region
Loan growth in CEE is not likely to occur in the same manner witnessed during the
decade preceding the crisis. The Central Bank of Austria and the Financial Market
Authority have imposed new rules that came into effect in 2012. Sustainable loan
growth will be more closely tied to deposit growth than in the past; foreign currency
loans are likely to diminish substantially. In general, the outlook for banking sector
growth remains favorable in a number of the regions countries and will by far outweigh
the losses of markets like Hungary.

Austria

March 2014

Solid fundamentals make Austrias

economy robust and resilient
Austrias excellent fundamentals are the result of reasonable budget policies, stable
democratic institutions, pragmatic economic policies and social stability. Austria
continues to outperform the Euro area average when it comes to growth, trade surplus
and financial ratios such as debt and deficit.

Austria posts higher growth and economic welfare

Since 2002, Austria has held an edge in real
GDP growth over the euro area, with the
Growth Differential: Austria vs. Euro Area
average annual differential coming to 0.7
4
percentage points. The existing heterogeneity
in the euro area has been intensified by the
2
European sovereign debt crisis; therefore
the growth differential between Austria and
0
0.4
0.7
1.0
0.6
1.2
1.6
-0.2
the euro area even increased in the last two
2
years. Based on current projections, the
domestic economy is likely to retain its
4
considerable growth edge over the euro area.
06

Austria also boasts an above-average level

of wealth in terms of per-capita GDP at
purchasing power standards. This positive
edge has been growing since 2007 and
crossed the 120% line in 2012.

07

08

Austria
Euro area
Growth Differential

09

10

11

12

0.8

0.7

0.5

13

14

15

Source: Eurostat, OeNB, IMF

+221511754
31

Austrias external trade is regionally diversified, exposure to foreign exchange risk is low
In 2012 about half of Austrias goods exports went to
euro area countries, thus remaining unaffected by the
% of total nominal exports of goods
euros exchange rate changes. Among Austrias trade
partners, Germany is still the most important partner
21.6%
by far, accounting for a share of around 31% of Austrias
30.6%
CESEE countries
Germany
total goods exports. Next in the ranking are Italy, the
U.S.A., Switzerland and France. On balance, the share
of shipments destined for euro area countries has
been on a steady decline since the mid-1990s (1996:
14.7%
61%). At the same time, exports to the CESEE countries
EU-12
and the dynamic Asian economies China, India
and Korea have been on the rise, with the CESEE
4.3%
share increasing from 15% in 1996 to 22% in 2012.
Asia
10.9%
Importantly, Austrias foreign trade is highly diversified
Rest
5.4%
in terms of goods categories. With a share of 38% of
6.8%
5.6%
Switzerland
Italy
total exports, machinery and transport equipment
U.S.A
constitute the single largest export item. Furthermore,
manufactured goods, chemicals as well as commodities
and transactions not classified elsewhere together
Source: Statistics Austria
account for some 47% of exports.

10

Austria

March 2014

Austria has a robust labor market with a highly skilled labor force
The Austrian labor market not only proved resilient to the financial and economic crisis
but has also been outperforming international developments in the subsequent
economic upswing. While employers cut working hours in the crisis year 2009, the
number of employees did not go down in tandem and has in fact been growing at an
above-average rate ever since. Under the adverse economic conditions of 2012 Austria
recorded the fifth-largest employment growth rate in the EU, following Latvia,
Luxembourg, Malta and Estonia, and at the same time posted the lowest unemployment
rate across the EU. In recent years, the Austrian labor market has benefited from its
basic flexibility but in particular also from the balance of interests achieved by the social
partners as well as from well-designed social and employment measures (e.g. subsidized
short-term working). In the same vein, Austria is among the top-ranking countries
worldwide as regards social stability (measured, for example, by the frequency of
strikes).
Unemployment rate in %, increase in percentage points

2012

08.2013

28
24
20
16
12
8
4
0

AT

LU

NL

DE

CZ

RO

DK

BE

FI

UK

SE

SI

PL

FR

EU

IT

HU

EA

BG

SK

IE

PT

EL

ES

US

JP

Source: Eurostat

Austria remains committed to sound public finances

Like all other EU Member States, Austria recorded an
increase in its general government deficit during the
economic and financial crisis but unlike most other
EU Member States, it was back on track to meet the
Maastricht limit of 3% of GDP in 2011. On the back of
the favorable employment dynamics that yield high
government revenues, the general government budget
deficit came to 2.5% of GDP in 2012 and thus remained
below the Maastricht limit. From 2001 to 2007, Austria
managed to reduce its general government debt ratio
by nearly 7 percentage points to slightly more than 60%
of GDP, i.e. below the euro area average. The favorable
debt dynamics also gave Austria the necessary leeway
to fight recession. Crisis-related developments have,
however, since driven the debt ratio back up again, to
74.0% at the end of 2012.

Budget Balances of EU Member States in 2012

% of GDP
0.2

Germany

0.3

Estonia
Luxembourg

0.8
1.9

Finland

2.5

Austria
Italy

3.0

Malta

3.3
3.7

Euro area
Belgium

3.9

Slovenia

4.0

Netherlands

4.1

Slovakia

4.3

France

4.8

Cyprus

6.3

Portugal

6.4

Ireland

7.6

Greece

10.0

Spain

10.6
2

10

12

Source: Eurostat

11

Austria

Austrias innovation indicators

bode well for future growth
Innovation performance and R&D activities
are good indicators of a countrys growth
prospects. The European Innovation Scoreboard is a Europe-wide tool that enables
multi-level comparisons of innovation performance. Austria has performed well
in recent years; the key indicators have
outperformed the EU average.

March 2014

Business R&D expenditure

(% of GDP)
Medium and high-tech
product exports (% total
product exports)

Youth education
attainment level
Community
designs per
billion GDP
in PPS
Community
trademarks per
billion GDP in PPS

SMEs innovating
in-house
(% of SMEs)

Innovative SMEs
cooperating with
others (% of SMEs)

1.0

2.0
PCT patent applications
per billion GDP in PPS

Public-private co-publications
per million inhabitants
Source: Eurostat

Austrias Inflation in line with the price stability target over the medium term
Austria looks back on a decade of stable price developments. In the decade preceding
the introduction of the euro (1988 to 1998), domestic inflation averaged 2.2%. From
1999, when the euro was introduced, up until 2012, inflation amounted to an average
of 1.94% in Austria, thus remaining below the euro area inflation rate of 2.07%. In
2012 Austria recorded a pronounced increase in service prices, as a result of which the
domestic HICP inflation rate exceeded that of the euro area in recent months. Since
early 2013, however, domestic inflation has been decreasing again and since September
it has been back in line with the price stability target of below, but close to 2%.

Austrias diversified economy reduces risk exposure

The Austrian economy is solidly
based on a well-balanced
Gross Value Added in Austria in 2012
% of total gross value added, at current prices
sectoral structure. The largest
share of gross value added
1.6%
2.8%
Agriculture, forestry
17.7%
Other
(close to 30%) is generated by
and fishing
Public administration,
services
private sector services, followed
education, health
and social work
21.8%
by activities classified under
Quarrying,
quarrying,
manufacturing,
manufacturing, electricity
electricity and water supply
and water supply
9.1%
as well as trade, transportation
Other business
and hotels and restaurants
activities
6.8%
Construction
(more than 20% each).
Manufacturing in Austria is
9.8%
Real estate
characterized by a high diversity
activities
of industries. The construction
22.3%
sectors contribution to gross
Trade, transportation,
4.9%
value added (some 7%) is
hotels and restaurants
Financial and
3.2%
insurance activities
relatively low by international
Information and
standards.
Source: Statistics Austria
communication

22+7+2135109182

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